It is not uncommon to experience the sting of an unexpected service fee and nor is it uncommon to ask whether businesses are allowed to do so in the first place. Do you have to pay these fees? Or alternatively, do you have any rights to challenge such fees?
Cancellation fees and policies
Generally speaking, agreeing to pay for a service (whether it be via booking an appointment or booking a service such as a hotel room) equates to entering into a verbal contract. As with any contract, these agreements come with terms and conditions to which you are bound, including any cancellation policy.
If a business has a cancellation policy in place, especially one involving cancellation fees, it is their responsibility to bring the policy to your attention at the time of booking their service. It is important that you make yourself aware of all terms and conditions of their policy prior to agreeing to pay for any such service.
Is it legal to have such policies?
The Australian Consumer Law requires that the terms and conditions of any contract with a consumer must be fair and not unreasonable. This means that businesses can legally have a cancellation policy requiring customers to pay cancellation fees under certain circumstances, so long as the fee is not extravagant or unreasonable.
Generally, cancellation fees must be capped to the amount of the damages actually sustained as a result of the cancellation, and consequently businesses are only entitled to claim ‘liquidated damages’ (an agreed fixed sum).
What is the court’s definition of ‘reasonable fees’?
The courts have taken a broad approach as to the definition of ‘reasonable fee’ and classify anything that is not ‘extravagant, exorbitant or unconscionable’ to be a sufficient standard of what is reasonable.
The courts have determined that businesses can take into account both financial and non-financial factors when considering what is a reasonable fee.
This encompasses factors such as:
- Whether the appointment was rescheduled
- Whether the business has been able to re-book the appointment that was missed
- Whether the business incurred any additional costs as a result of you not making the appointment
- Whether the cancellation has impaired business cash flow
- Whether a cancellation fee would encourage or discourage customers from returning to the business and/or maintaining their appointment, and
- The length of time, prior to the appointment, in which the cancellation of the service occurred.
It is likely that the interpretation of what amounts to a reasonable fee will be effected by the context of the COVID-19 pandemic.
What does this mean for you?
If you have been charged a relatively small fee, such as 10% of the cost of the service and have made the cancellation outside the terms of the cancellation policy without any extenuating circumstances, then usually you will be obliged to pay their cancellation fee.
However, there are certain factors that can create a more complex situation and may give rise to actionable consumer rights, such as:
- A very hefty fine
- You were never made aware of the cancellation policy
- A cancellation policy did not exist, or
- There were extenuating circumstances outside of your control, which gave you no choice but to cancel the service.
Where you find you have to cancel a service due to COVID-19 related circumstances, you may be able to rely on the last factor listed above to seek a reduction or waiver of the cancellation fee. An inability to proceed with the service due to government restrictions is likely to provide a strong basis for a reductions waiver; in contrast, it is unlikely that financial hardship alone will be sufficient to establish extenuating circumstances outside of your control.
How can Sharrock Pitman Legal assist?
If you believe you have been wrongly charged with a cancellation fee for a service under such circumstances, please feel free to contact our Litigation team on 1300 205 506. Our Litigation lawyers will provide you with advice regarding your rights, in addition to guiding you through the steps for recovery that might be possible in your circumstances.
The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.
Liability limited by a scheme approved under Professional Standards Legislation.
Caroline Callegari is an Associate Principal and leads our Disputes & Litigation team. She has an advisory and advocacy practice in the following areas: Commercial Litigation, corporate and personal disputes, debt recovery and, insolvency and bankruptcy matters. Caroline can be contacted on (03) 8561 3324.
